Encompass Health (EHC): Reassessing Valuation After Q3 Growth and New Lake Worth Rehabilitation Hospital Launch

Encompass Health (EHC) just posted third quarter revenue growth and unveiled its new Lake Worth rehabilitation hospital, a combination that underscores steady expansion as digital healthcare and aging demographics reshape post acute care demand.

See our latest analysis for Encompass Health.

Those expansion moves come after a strong run, with Encompass Health’s share price up a solid year to date and its three year total shareholder return of 86.59% signaling sustained momentum rather than a one off bounce.

If this post acute care story has your attention, it is also worth scanning other healthcare names through our curated healthcare stocks to spot similar long term compounders.

Yet with the shares already delivering robust multi year returns but still trading below analyst targets, investors face a familiar dilemma: is Encompass Health quietly undervalued, or is the market already baking in years of growth ahead?

Most Popular Narrative Narrative: 23.7% Undervalued

Compared to Encompass Health’s last close at $107.11, the most followed narrative anchors on a fair value near $140, implying notable upside if its roadmap plays out.

Sustained execution of the company's high-return de novo hospital and bed addition strategy, combined with a robust pipeline in underserved/new markets (and CON relaxation in key states), is set to drive outsized same-store and total discharge growth, translating to accelerating revenue and EBITDA expansion relative to market expectations.

Read the complete narrative.

Want to see how steady, mid single digit volume gains can justify a premium earnings multiple and a higher fair value anchor, without any speculative heroics? The narrative quietly leans on rising margins, disciplined capital deployment, and a future profit base that has to materially outgrow today’s earnings. Curious which assumptions do the heavy lifting in that equation, and how much stretch is really baked into the target price? Dive into the full breakdown to unpack the specific growth and profitability milestones behind this valuation call.

Result: Fair Value of $140.33 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, stubborn labor shortages and heavy de novo spending could squeeze margins and free cash flow, which may force investors to reassess today’s optimistic growth runway.

Find out about the key risks to this Encompass Health narrative.

Build Your Own Encompass Health Narrative

If you are skeptical of this view or simply want to stress test the numbers yourself, you can build a custom narrative in under three minutes: Do it your way.

A great starting point for your Encompass Health research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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